FER Q1 2025: 407 Toll Rev/Trip Up 22%, Schedule 22 Outflows Persist
- Robust pricing power: Management highlighted strong pricing dynamics on assets like the 407 ETR, with Q1 average revenue per trip up 22%—showing the ability to drive higher revenues even in challenging traffic environments.
- Attractive growth pipeline: There is a well‐defined public pipeline for new U.S. Managed Lane projects (e.g., I‑24, I‑77, I‑285) and ongoing expansion in airport terminals such as JFK, underpinned by aims for double-digit equity IRRs on new, construction‐linked projects.
- Increased investor appeal and liquidity: The company’s strategic stake acquisitions and favorable liquidity—evidenced by trading above NASDAQ requirements and focused U.S. investor outreach—support improved governance and potential for enhanced shareholder returns.
- Ongoing Cash Outflows: The Schedule 22 payments are expected to continue as an ongoing cash outflow, posing a potential long‐term burden on free cash flow and overall profitability [Index 15].
- Revenue Growth Uncertainty: The exceptional 22% increase in average revenue per trip on the 407, driven by temporary factors like double toll hikes and promotions, is not expected to be sustainable or extrapolated, creating uncertainty around future revenue growth [Index 11].
- Exposure to Traffic and Mix Risks: The performance of U.S. Managed Lanes remains vulnerable to unpredictable factors—such as unpredictable mandatory pricing adjustments, weather disruptions, and shifts in heavy versus light vehicle traffic—which may impair future revenue predictability [Index 6][Index 11].
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Schedule 22 Outlook
Q: Will Schedule 22 payments persist long-term?
A: Management expects Schedule 22 payments to remain an ongoing cash outflow to support service quality, noting that these costs will continue as long as the quality and speed of travel are maintained. -
Pricing Sustainability
Q: Can high toll prices persist with low volume growth?
A: Management believes that despite modest volume growth, robust Mandatory Modes and long‐term underlying trends support sustained high pricing, even though current high increases like 22% are not fully extrapolatable. -
Liquidity & NASDAQ
Q: Is a US listing expected this year?
A: Management confirmed that trading liquidity is strong—trading above NASDAQ minimums—with ongoing investor outreach, though no definitive timeline for a listing was provided. -
407 Governance & IRR
Q: Does a larger 407 stake improve governance and yield IRR?
A: Management indicated that while details will be finalized with the transaction’s closure, the additional stake is aimed at enhancing governance and the project targets double-digit IRRs, particularly when construction risk is present. -
Managed Lanes Traffic Mix
Q: Is the heavy vehicle mix unusually high due to tariffs?
A: Management observed that the current mix of heavy vehicles appears normal, with no abnormal surge from tariff-induced pre-stocking; ongoing monitoring will ensure trends remain consistent. -
Travel Promotions Impact
Q: Do promotions offset toll ticket increases?
A: Management explained that targeted promotions—reaching roughly 1 million customers—are part of their strategy; the strong ticket increase partly reflects toll hikes but is moderated by discounting measures. -
Airport Contract Status
Q: Are 18 airline deals sufficient for full capacity?
A: Management noted that with 18 agreements already in place, the new terminal is well positioned for initial operations, with further contracts expected as capacity constraints develop. -
Labor & Geopolitical Risk
Q: Are labor issues affecting construction amid geopolitical risks?
A: Management reported no current labor availability issues, affirming that their workforce is validated and any future risk will be closely monitored. -
Asset Pipeline
Q: What new asset pipeline projects are in the works?
A: Management highlighted a public pipeline that includes several new Managed Lane projects—such as I-285 East/West, I-24, I-77, and I-495—indicating robust opportunities in U.S. infrastructure with further details forthcoming. -
US Lanes Sensitivity
Q: How sensitive are lanes to regional GDP changes?
A: Management explained that U.S. lanes are positively correlated with regional GDP, suggesting that local economic activity plays a key role in traffic performance. -
LBJ Pricing Outlook
Q: Will LBJ tolls ramp up after roadworks finish?
A: Management indicated that LBJ’s pricing remains uncertain until adjacent road construction is complete, with a potential ramp-up expected around 2027 once projects fully conclude. -
FX Impact Timeline
Q: When will FX translation headwinds hit earnings?
A: Management clarified that FX hedges currently cover cash flows and investments, so significant translation impacts on the P&L are not expected in the near term.
Research analysts covering Ferrovial.